Rising demand for real estate
The growth of Africa’s cities is creating a need for increased volumes of good quality commercial and residential real estate of all types. In the office sector, demand for space has been generated by the increasing number of multinational companies seeking offices in African cities, particularly in key regional hubs such as Nairobi and Lagos. In the past, corporate occupiers may have sought to service the whole continent from a single office in South Africa, but multinationals active in Africa increasingly recognise the need for offices across a range of key cities.
Regardless of recent falls in oil prices, the energy sector is an important driver of activity in many of Africa’s most dynamic office markets. Demand from oil-related companies, combined with an extreme lack of supply, has made Luanda in Angola one of the most expensive office markets in the world, with prime rents at US$150 per sq m per month. Likewise, recent offshore gas discoveries have driven construction activity and rental growth in Mozambique’s capital, Maputo. While cities such as these are now experiencing increased levels of development activity, high quality office space built to the specifications expected by international companies remains scarce in most African cities.
The retail property sector has emerged as a major focus for construction activity in recent years, as shopping centre development has been encouraged by the growth of the urban middle classes and the expansion of South African retailers such as Shoprite and Pick n Pay into the rest of Africa. Modern shopping malls are a relatively new phenomenon in much of Africa; Accra Mall, for example, which is generally recognised as the first modern shopping centre in Ghana, opened in 2008. Its success has helped to encourage further development, with the larger West Hills Mall opening in Accra in late 2014.
The Kenyan capital Nairobi has been a particular focus for retail construction, and a series of malls are being developed that are setting new standards for size and quality in this market. Garden City Mall, the largest in East Africa, opened in 2015 and the even bigger Two Rivers Mall is set to open in 2016. Two Rivers will be anchored by the French supermarket Carrefour, which is the latest major international retail brand to enter Kenya. The new malls of Nairobi are generally built in mixed-use formats that also incorporate office, residential and leisure elements, and they are creating new city hubs where people can live, work, shop and play in the same location.
Africa’s population boom is creating a need for residential property, ranging from mass market affordable housing to high-end luxury properties. Attempting to address this, there have been numerous announcements in recent years of ambitious large-scale satellite city projects across Africa, mostly by private developers.
The most important large urban development currently under construction in Africa is arguably Eko Atlantic, a new city district being built on 10 million sq m of reclaimed land off the coast of Lagos, which is planned to eventually house 250,000 residents. Work also commenced in 2015 on Modderfontein New City, a large Chinese-financed development near Johannesburg.